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Brent crude settled above $90/bbl for the first time since October, as tensions in the Middle East threaten to boil over into a wider regional war.
Crude is pricing increased geopolitical risk following news reports that Israeli embassies have been placed on high alert due to increasing threats of an attack by Iran, which has promised revenge for this week’s Israeli strike in Syria that killed high-ranking Iranian military personnel.
The U.S. issued its sharpest public rebuke toward Israel since the start of the war with Hamas, with President Biden demanding an immediate cease fire in Gaza and more steps by Israel to address the safety of Palestinian civilians and aid workers; earlier this week, an Israeli strike killed seven aid workers in what Prime Minister Netanyahu called a tragic mistake.
In a phone call today, Biden “made clear that U.S. policy with respect to Gaza will be determined by our assessment of Israel’s immediate action on these steps,” the White House said in a statement, signaling for the first time that the U.S. might reassess backing Israel’s war in Hamas.
Crude also has found support from tightening global supplies and signs of strong U.S. fuel demand, which lifted prices on Wednesday.
Front-month Nymex crude (CL1:COM) for May delivery closed +1.3% to $86.59/bbl, and front-month June Brent crude (CO1:COM) ended +1.4% to $90.65/bbl, the fifth straight daily gain and highest settlement value since October 20 for both benchmarks.
Meanwhile, U.S. natural gas futures fell as domestic inventories remained nearly 40% above the five-year average, with front-month Nymex natgas (NG1:COM) for May delivery finishing -3.6% to $1.774/MMBtu.
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The oil price rally puts $93-$95 Brent crude within reach given the extension of OPEC+ production cuts and perceived risks of Iranian supply being affected by the Mideast conflict, although strong resistance at that level looks likely as it could lead producers to sell forward and speculators to take some profits, Citi analysts said.
But Citi remains bearish for 2025, forecasting demand growth will slow to less than 1M bbl/day as the post-COVID jet fuel recovery loses momentum and electric vehicle take-up becomes more visible.
“We continue to see an inflection from a bull market to a bearish one by mid-year,” Citi said.